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  5. The Dynamic Effects of Conflict
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The Dynamic Effects of Conflict

Paper Session

Sunday, Jan. 5, 2025 1:00 PM - 3:00 PM (PST)

Hilton San Francisco Union Square, Union Square 5
Hosted By: Peace Science Society International & American Economic Association
  • Chair: Carlos Seiglie, Rutgers University-Newark

The Economic Costs of the Russia-Ukraine War: A Synthetic Control Study of (Lost) Entrepreneurship

David Audretsch
,
Indiana University
Paul Momtaz
,
Technical University of Munich
Hanna Motuzenko
,
Goethe University-Frankfurt
Silvio Vismara
,
University of Bergamo

Abstract

Entrepreneurs are often situated in extreme environments characterized by violent conflict. Yet, war is largely a blind spot in entrepreneurship scholarship. As a first step to closing this gap, we offer a well-identified synthetic control study of entrepreneurial dynamics in the Russo-Ukrainian war. Relative to the synthetic counterfactual, Ukraine’s number of self-employed dropped by 20%, and the number of Ukrainian SMEs temporarily dropped by 14% but recovered within five years of the start of the conflict. In contrast, Russia had lost more than 1.4 million SMEs (42%) five years into the conflict. The disappearance of entrepreneurs is driven by both fewer new SMEs created and more existing SME closures. To pave the way for systematic scholarship on “war and entrepreneurship,” our study proposes a conceptual framework integrating conflict into the theory of entrepreneurial choice and suggests numerous avenues for future research.

To Russia with Love? The Impact of Sanctions on Regime Support

Robert Gold
,
Kiel Institute for the World Economy
Julian Hinz
,
Bielefeld University and Kiel Institute for the World Economy
Michele Valsecchi
,
New Economic School and University of Gothenburg

Abstract

Do economic sanctions affect internal support of sanctioned countries' governments? To answer this question, we focus on the sanctions imposed on Russia in 2014 and identify their effect on voting behavior in both presidential and parliamentary elections. On the economic side, the sanctions significantly hurt Russia's foreign trade — with regional variance. We use trade losses caused by the sanctions as measure for regional sanctions exposure. For identification, we rely on a structural gravity model that allows us to compare observed trade flows to counterfactual flows in the absence of sanctions. Difference-in-differences estimations reveal that regime support significantly increases in response to the sanctions, at the expense of voting support of Communist parties. For the average Russian district, sanctions exposure increases the vote share gained by President Putin and his party by 13 percent. Event studies and placebo estimations confirm the validity of our results.

Geopolitical Shocks and Commodity Market Dynamics: New Evidence from the Russia-Ukraine Conflict

Joshua Aizenman
,
University of Southern California
Robert Lindahl
,
Linköping University
David Stenvall
,
Linköping University
Gazi Salah Uddin
,
Linköping University

Abstract

We investigate the event-based geopolitical shocks from the Russian invasion of Ukraine on agricultural and energy commodities using daily event-based structural vector autoregression (SVAR). We find that the geopolitical shock affects the markets of wheat (2%), corn (1%) and European natural gas (7.5%). However, substantial heterogeneity is observed among the agricultural and energy markets. Geopolitical risk stemming from the Russia-Ukraine conflict affects the European natural gas market more strongly than the US and Asian markets. The regional segment of natural gas markets could explain this. Finally, our analysis explores how geopolitical news affects the dynamics of stock, currency, and bond markets.

Can Audits Shift the Battleground? Supply Chain Certifications and Conflict Dynamics in the Congo

Samuel Chang
,
University of Chicago
Hans Christensen
,
University of Chicago

Abstract

We examine the impact of conflict-free certifications for small-scale gold mines, introduced to comply with the Dodd-Frank Act, on conflict dynamics in the Eastern Democratic Republic of the Congo. While Dodd-Frank enactment itself did not significantly alter conflict patterns, actual certifications displaced armed group-initiated conflicts from within a 10-kilometer radius around certified mines to other mining areas 25-75 kilometers away. Consistent with full displacement, overall conflict intensity within a 75-kilometer radius of certified mines remains largely unchanged, and conflict intensity is not decreasing in certification frequency at the aggregate territory level. Our findings suggest that conflict mineral certifications prompt armed groups to reallocate their protective activities from uncertified to certified mines but ultimately fail to contribute toward resolving the armed conflict in the Congo.

Discussant(s)
Raul Caruso
,
University of Cattolica del Sacro Cuore-Milan
Anna Balestra
,
University of Cattolica del Sacro Cuore-Milan
Harry Pickard
,
Newcastle University
Valerio Leone Sciabolazza
,
Sapienza University of Rome
JEL Classifications
  • F5 - International Relations, National Security, and International Political Economy
  • H5 - National Government Expenditures and Related Policies